Texas couple say S.D. securities firm wiped out their million
July 7, 2000
Don Bauder
A Texas husband and wife who run a Christian bookstore and summer camp charge that the San Diego brokerage Hampton-Porter wiped out their $1.2 million assets by putting them in speculative stocks, and on heavy margin without their authorization.
San Diego attorney Ronald A. Marron filed an arbitration action against the firm and its officers, along with certain other entities, this week with the National Association of Securities Dealers, or NASD.
"NASD arbitrations are designed to be confidential," says Hampton-Porter's New York attorney, Simon Kogan. "I am disturbed that a statement of claim was released to the press by a party to the arbitral forum." He wouldn't discuss other matters in the case.
"They can run, but they can't hide," says Marron, arguing for more public disclosure.
Steven and Jenifer Crosby of New Braunfels, Texas, say they got a cold call from a Hampton-Porter broker, who told them he could provide them with returns that were at least average with the market, using conservative investment strategies, with most of the money in a diversified mutual fund.
They transferred their $1.2 million to the firm, which is located downtown.
According to the arbitration complaint, the Crosbys were soon told that Bryan Laurienti of Hampton-Porter would be trading their account. He told them he would be using margin (investing with borrowed funds) and trade in options, but never explained the risks, according to the complaint.
The value of the account rose to $3.2 million -- but a full $1.2 million was on margin, says the complaint. In February of this year, the Crosbys flew to San Diego and met with Laurienti, their original broker, and another official.
The Crosbys wanted their margin cut in half in six weeks, then reduced until it was gone. And they wanted more conservative mutual funds. The firm never followed the instructions, according to the complaint.
Laurienti put the Crosbys heavily into El Segundo-based En Pointe Technologies, an e-commerce stock. But he did not tell the Crosbys that he had increased their margin account to $2 million, according to the complaint. So they had no way of knowing that their February instructions were not being followed, they say.
En Pointe hit $47.38 on Feb. 25, and then plunged. Yesterday it closed at $7.75, down 25 cents. Recently, it slashed 15 percent of its work force.
Crosby claims that he was informed by several Hampton-Porter brokers that an En Pointe official had paid the brokerage $1.5 million to support the stock. "That is totally incorrect," says Javed Latif, En Pointe's chief financial officer.
Eventually, the mutual funds had to be liquidated to pay the margin debt.
The Crosbys learned that Bryan Laurienti's brother, John William Laurienti, also with Hampton-Porter, along with Gregory Dubois Walker, president of the firm, owned 522,700 shares of En Pointe.
According to NASD records, the Securities and Exchange Commission in 1995 barred John Laurienti from acting as a supervisor (although he was permitted to reapply later) and fined him $10,000.
In 1994, the Massachusetts Division of Securities found that John Laurienti had failed to discharge his supervisory responsibilities properly.
John Laurienti's and Walker's margin calls had crashed En Pointe stock, according to the complaint.
In a declaration accompanying the complaint, former Hampton-Porter broker Adam G. Gilman says he was "offered an incentive payment" to sell En Pointe stock.
Gilman's NASD credentials are hardly imposing: He worked for La Jolla Capital, later renamed Pacific Cortez Securities, which was closed down by the Department of Corporations for violations resulting from its high-pressure peddling of low-quality stocks.
Gilman was disciplined by Oklahoma securities regulators while he was with La Jolla Capital. Last fall, San Diegan Mark Roberts complained to me that his account plunged from $8,000 to $2,000 under Gilman, who wouldn't carry out sales when requested. |
